Dutch Disease is associated with a dramatic decline in the demand for a primary commodity produced by a country.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 2The market price of the product produced by Jones Inc, is 6 per unit, which is higher than the average cost of 4 per unit at the profit maximizing output level. The average variable cost of production is 3.5 per unit. If demand for its product declines due to introduction of cheaper substitutes and the market price of the product falls to 3.8 per unit, which of the following statements will be true?
a. The firm will close down in the short run.
b. The firm will continue production as long as the market price is above average variable cost.
c. The firm will continue production as long as the market price exceeds fixed cost.
d. The firm will minimize it losses by producing where average variable cost equals 3.8.
QUESTION 3One assumption of the model of perfect competition is that entry into the market is easy. This implies that:
a. there are government licensing requirements for a firm to enter the market.
b. there are no significant economies of scale relative to the size of the market.
c. one firm has gained a patent in the industry.
d. significant economies of scale do exist in the industry.
e. there is no government intervention.
QUESTION 4Pure monopoly:
a. is characterized by a single supplier.
b. is a market structure in which no close substitute products are available.
c. exists when entry and survival of potential competitors is extremely unlikely.
d. is characterized by all of the above.
QUESTION 5A country with a strong bargaining power is likely to direct the terms of trade in its favor.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 6The gap between average total cost and average variable cost:
a. is constant at all ranges of output.
b. is high at high levels of production.
c. declines as output expands.
d. depends on the production technology.
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